Paris, Feb. 15 - LVMH Moet Hennessy Louis Vuitton SA, the French luxury goods giant, Thursday posted a 30% jump in 2006 net profit, lifted by strong sales from its three main divisions, improved profitability and lower exceptional charges.
Paris-based LVMH, owner of some of the world's best-known champagne, perfume and fashion labels, said net profit for 2006 was EUR1.88 billion compared with EUR1.44 billion in 2005, when it booked charges related to the closing of its Samaritaine department store.
"The excellent performance in 2006 illustrates the vitality of our major brands which continue to strengthen and gain market share," Chairman and Chief Executive Officer Bernard Arnauld said in a statement. He added the group would rely on its current growth model to ensure another year of strong growth in 2007.
The net profit figure slightly beat analyst expectations. The average estimate of 7 analysts polled by Dow Jones Newswires pegged the profit figure at EUR1.85 billion.
Profit from recurring operationsrose 16% to EUR3.17 billion from EUR2.74 billion, the company said, while revenues were up 10% to the highest annual level ever at EUR15.31 billion compared to EUR13.91 billion last year.
Revenue grew by double-digit rates in all regions except Japan, where it rose 4%. Japan is considered a tough region for luxury goods groups partly because of its weak currency. Arnault moved to reassure analysts in a press conference and said he expected the yen to rebound in 2007. Sales of the group's fashion and leather goods division, the largest contributor to overall sales with brands like Louis Vuitton, rose 9%, or 11% at constant exchange rates, to EUR5.22 billion.
The company did not provide a breakdown of each brand's contribution but executives said in a press conference that revenues from Fendi, dubbed a future star brand, remained well behind the Louis Vuitton brand.
In response to questions from analysts about the possibility of a divestment in the fashion and leather division, executives said the company's portfolio was balanced and that any adjustments would be marginal.
The wines and spirits division brought in EUR2.99 billion in sales, up 13% from last year, with a price increase policy accounting for one-third of the growth.
Wines & spirits division head Christophe Navarre said there was "no question of splitting with (LVMH's spirits distribution partner) Diageo PLC (DEO)."
There has been talk in the market that U.K.-based Diageo might pull out of its joint venture with LVMH in order to make a bid for rival spirits maker Remy Cointreau SA (13039.FR).
Perfumes and cosmetics sales rose 10% to EUR2.5 billion, and posted a 28% jump in profit from recurring operations. The watches and jewelry division posted the highest revenue growth, increasing 26% to EUR737 million. The unit's profit from recurring operations jumped almost four-fold to EUR80 million from EUR21 million last year.
LVMH shares closed up 1%, or EUR0.85, at EUR82.85 Wednesday, prior to the release of the earnings.